ON THE BRINK

October 20, 2010


ON THE BRINK

The data and information used in this document results from a Congressional Hearing conducted by Mr. John F. Tierney for the Subcommittee on National Security and Foreign Affairs.  This hearing occurred in Washington, D.C. on September 22, 2010.  The individuals providing testimony are as follows:

  1. 1.       Mr. Jeff Faux
  2. 2.       Mr. Mark A. Gordon
  3. 3.       Mr. Michael R. Wessel
  4. 4.       Mr. John F. Tierney

Other documents referenced are as follows:

  1. 1.       “The DoD Manufacturing Technology Program”
  2. 2.       “Manufacturing Insecurity”

Selected excerpts from these documents will be given as italicized.  My comments will be in standard eleven point text.

The Honorable John F. Tierney chaired the hearing and called the assembly due to great concern voiced by the Department of Defense.  

I have been associated with manufacturing since 1961 and have performed as a graduate engineer since 1970.  During this period of time, I have seen many initiatives take effect—some lasting and some fading away.  Programs such as Six Sigma, Lean Engineering, Lean Manufacturing, Reliability Methodology, KanBan Scheduling, Statistical Process Control, etc have added greatly to improved quality, efficiency and the overall cost savings for manufacturing processes.  The trend towards automation, digital control of processes and timely reporting of quality “markers” has added remarkable improvements over the years and has allowed the United States to compete with any country in the world.

One trend that is very disturbing is the flight of manufacturing from the United States to countries abroad.  We have lost, and are losing, our manufacturing base at an alarming rate!  One trip to any department store will support that fact.  “Made in America” no longer can be found on most consumer items we purchase.   Stores such as Wal-Mart, Best Buy, Toys-R-Us and Radio Shack depend upon foreign sources to remain low cost providers.  When I worked for General Electric, we had a mandate that at least 30% of all components must come from LCC ( Low Cost Countries ).  A real culture change for most  engineering “types” working for the company.   For decades, manufacturing has been the backbone of the American economy.  The United States has been known as the land of innovation, the home of the automobile, the computer and the jet plane.  These innovations led to good jobs for hardworking Americans.  American manufacturing is the bastion of quality, where the words “Made in America” signify superior craftsmanship, durability and value.    This movement abroad has created one huge problem—the defense of this great nation is now dependent upon the “good graces” of China, South Korea, Mexico, Japan, India etc.  There is no longer the requirement for components going into our most sophisticated weapons systems to be manufactured in the United States.

I would like now to list several “cuts” from the testimony given during the hearings that took place this past September.  You will become aware of  the deep concerns from these experts.

  • Manufacturing jobs have been dropping steadily over the last several decades.  After WWII, manufacturing accounted for 40% of American jobs; today, that number is closer to 11%.
  • Outsourcing takes control of the supply chain out of our hands.  When foreign companies, and governments, control the production of necessary parts, our critical defense needs are subject to geopolitical forces that are beyond our control. In  2003, a Swiss company decided to delay delivery of essential parts for the Pentagon’s Joint Direct Attach Munitions—commonly known  as “smart bombs” –due to their ability to pinpoint targets.  The Swiss government’s opposition was a result of their dislike for the war in Iraq.  Not only did this force the DoD to acquire these parts at a higher price, there was a significant delay in getting these munitions to our forces overseas.  Lives were lost.
  • There have been countless situations where the DoD has received foreign parts that did not meet quality standards, including substandard and counterfeit materials.
  • China produces—and therefore controls—97% of rare earth oxides.  It would take about 15 years to establish a domestic supply chain.  The national security implications of this imbalance are impossible to ignore.
  • There are not enough highly skilled workers to perform the critical tasks needed to sustain our industrial base.  We have more people retiring than entering the manufacturing workforce, which means companies that want to build in America cannot find workers with the right skills to do so.
  • We have been running trade deficit in manufacturing for over thirty (30) years, relentlessly off-shoring production and steadily losing ground in our capacity to produce cutting edge technologies.
  • Innovation, design and engineering follow production. For years, US policy-makers have rationalized the movement overseas by manufacturing on the grounds that the technical jobs and capacity would remain in the United States.  THIS IS A JOKE (MY words!!)
  • Seventy percent (70%) of the industrial R&D is performed by manufacturing-based companies and the bulk of that R&D is applicable to manufacturing processes and procedures.
  • China now holds close to two and one-half TRILLION dollars of our IOUs.   (YOU ARE BRAVER THAN I AM IF THIS DOES NOT SCARE THE PANTS OFF YOU!)
  •  CEOs now regularly acknowledge and even boast that they are “global”, not American corporations.  The CEO of Cisco Systems—a major military contractor—stated that “it is our outline to promote a strategy to become a Chinese company.”
  •  America’s financial “elite is definitely aware that if manufacturing industries shrink, so would the political power of the strongest unions.  The unions definitely interfere with their “vision” for America.  Over the past two decades, the United States has consistently subsidized, protected and rescued the banking and finance sector.  Among the perverse results of this “too Big to Fail” industrial policy has been the systematic redistribution of capital from the making of products from the manufacturing sectors to the making of products on Wall Street. 

There are only three way of creating wealth; 1.) Grow it, 2.)  Dig it, or 3.) Make it.  Manufacturing multiplies each dollar spent within the sector into an additional $1.41 dollars of economic activity—higher than any other economic sector.  Hopefully, it is not too late to reverse this trend although I see nothing from the political “hacks” in Washington that would indicate specific movement back towards American manufacturing.  This needs to worry all of us.  We are continuing to dig a deep deep hole for the security of our country.

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22 Responses to “ON THE BRINK”


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